Sunday, 11 September 2011

Session on Forensic Accounting and Fraud Management

Mr. Nikhil Parulkar, Head of Risk Containment Unit at Kotak Mahindra Bank, Mumbai provided us with the basic insights into the world of risk management with respect to monetary transactions on 30th August, 2011. He is a certified forensic expert, a proven hand in examining fraud cases, and adept at recognizing the loopholes which can give room to fraud, in the banking industry. He has dealt with many fraud investigations . He has worked with Indian banking big wigs, such as ICICI and HDFC , prior to joining Kotak Mahindra apart from devoting his invaluable expertise with consulting big wig Ernst & Young. 
Mr. Nikhil took a daylong session packed with students of first and final years. Mr. Nikhil started off by explaining “what is fraud and what kind of frauds occur in the banking sector”. He pointed out the existence of frauds in history specifying the case of Al Capone who has been credited with being the reason for the coin of the term “Forensic Accounting”. He then went on to explain the different measures needed to be taken to avert fraud and the various ways to improve process transparency for the minimization or elimination frauds to the largest extent possible. It was an interactive session with a volley of questions from the students about the measures needed to be taken to make an organization foolproof to frauds. Students also enquired about the role of auditors in scrutinizing the reports and successfully giving early warning signals.
Mr. Nikhil started by explaining the definition of fraud. He notified the lack of proper meaning attached to the hazard known as “FRAUD” as no such peculiar definition of “FRAUD” has been underlined as per the Institute of Chartered Accountants of India better known as the ICAI. The only law that recognizes it as a wrongdoing is the IPC-420 which is for cheating. He then went on to define “FRAUD” as per the Common Wealth which involves ethics and intent as the parameters along with other factors. He explained the terminology focusing on “the guilty mind” and citing the example of Satyam.
  Mr. Nikhil then pointed out the various characteristics of “FRAUDS” apart from explaining every aspect of it. He brought to light the several consequences of the problem and the reasons affecting the susceptibility of major organizations to “FRAUD”. Here he came up with the significance of forensic accounting. Nikhil questioned whether a company falters or does not falter due to the DNA of the company or the DNA of the people who make it. He then went on to discuss the fraud triangle, fraud diamond (which is an addition of a new dimension to fraud triangle), the capability dimension, which has been the most notorious dimension, having debilitating effects as seen in the recent past. He enumerated the dimensions of fraud triangle, perceived pressure facing the individual, opportunity to commit fraud, person’s rationalization and integrity.
Towards the end, the students were asked to work on a case study and scrutinize the decisions which were taken by the board of a company and the feelers the decisions send as a precursor to the imminent debacle. The powers being always vested with the management is a driver towards the unethical task, if not over seen by the highest authority in an organization. It is the responsibility of the higher management to set high corporate governance standards and they should lead by example, which instills a sense of ethical behavior in all the fellow colleagues to practice utmost highest standard.
“Inside Job” an informative movie was screened post completion of the session, which is based on the chronicle of events and decisions which led to 2008 financial meltdown/crisis, the root cause of the financial crisis and the role of persons vested with power, how they can influence the systems was insightful and a discussion followed over the good and bad of the decisions sensitized the students towards the importance of ethics and role of corporate governance. And a pledge was taken by all the students that they will follow highest corporate governance standards where ever they work and see that their subordinates and superiors follow the ethics by being an example.

IIM Raipur conducts first edition of Fin-TALK: The Guest Lecture Series

Finatix, the Finance Club of IIM Raipur invited Mr. Gurumoorthy Mahalingam, Executive Board Member, Securities and Exchange Board of Ind...